In today’s tight labor market, what does it take to stand out as an employer, to attract and retain top talent? Most leaders agree that quality talent is essential to growth and success, yet they often believe compensation is the key to attracting and retaining them. What else is there?

Studies show that as long as the pay is generally market rate, other factors reign supreme.

Bob learned this early on as a teenager when his family ran a retail store and he was puzzled about why his parents thanked workers at the end of the day. They were, after all, being paid, he reasoned as a youngster. His parents instilled in him a deep respect for worker’s efforts and dependability, which continues to inform his leadership today. That kind of respect and appreciation is a key element of culture.

More Than Money

According to the above Glassdoor study of 615,000 participants, what matters more than money is culture and values followed by leadership.

If culture matters more than money, what exactly is "culture?"

As a consultant, I have had the privilege of seeing many kinds of culture. Since there is a wide range of what can be an effective culture, the challenge for each company is to recognize its own culture and be intentional about its elements. This can be challenging for those inside it. As organizational consultants are fond of saying, “Do the fish see water?”

Culture can often be revealed in the stories that are told and retold, just as in a family. Be sure to highlight the ones that are most representative. Is the favorite story about a big new client who was developed over time, representing tenacity? Is it a risk-taking culture that's proud of successes and tolerant of research failures? Is it teamwork above individual recognition? Any of these can be attractive to employees, as long as they know what they're opting into.

Companies pay attention to brand and customer attributes, and that same attention needs to align with and integrate with the selection process when recruiting, as well as the onboarding process for new hires. Companies with strong cultures invest time in training and orienting new hires to what matters most. They invest in leadership development to ensure that everyday events such as meetings, compensation and delegation are aligned with the espoused values.

Some smaller companies ensure a cultural fit by having the CEO interview everyone. If this is feasible, it’s one way to ensure fit. I recommend additional interviewers as well, as successful cultures have shared their stories and values so that the message is consistent. Involving others in the selection process also enhances engagement for both the interviewers and the recruits.

Cultural Fit: Aligning The Message

Clarity of values matters.

One client that engaged me was trying to increase the level of innovation in their culture. In researching what they needed to change, they described their business as largely based on government contracts. These contracts extended for decades and spelled out exactly what was required over hundreds of pages for successful compliance.

It turned out their innovation-oriented hires were quite unsuited for the environment and frustrated. Their long-service employees who were a good fit were hired for engineering skills and attention to specifications, and their cultural expectations were met. In selecting for innovative engineers, the recent hires were not a cultural fit, so they revised their selection criteria. It turns out they were seeking employees who were proactive and tenacious.

Applying Culture

Culture is essentially the compilation of how people treat each other and the actions which represent the values. It is the outcome of all the ingredients of small interactions and behaviors that reflect the values.

How do leaders apply these principles in a practical way, day to day?

Bob, now a financial planner, learned his early lessons in management and entrepreneurship as a teenager. His previously mentioned family owned a high-end stationery store, which at one time had three Boston locations. In retail, employees are always “on” and have the chance to make or break a customer interaction or customer loyalty, thus they directly impact revenue. Later, as a manager and then as an owner of that business, he honed his ideas about culture and leadership. Now as a financial planner, he uses that business-owner experience to advise his entrepreneurial clients on a full range of financial planning issues.

Retaining talent is a result of a rewarding culture and a key to business success. Bob follows sound leadership principles to advise entrepreneurs to ask employees what they want and what is working.

What about the job and the company keeps them there? This simple inquiry helps articulate the elements of culture that are attractive. Consistent with the research on what keeps employees — culture and values — he customizes recognition and compensation. Sometimes a bonus matters more than a raise, sometimes extra vacation, a professional conference or being nominated for an award. Unexpected recognition with tickets or a dinner out heighten the message of appreciation and can, therefore, make more of an impression than an anticipated raise. “Money,” Bob says, “is not the spackle over other workplace issues.” Culture matters more than compensation.

Culture is set at the top and is comprised of how people treat each other, the experience of shared values, a collegial environment, as well as the physical environment. It includes an ongoing respect and appreciation for contributions, as well as an environment that welcomes new ideas and even disagreements. Selecting for cultural fit increases the likelihood that colleagues enjoy each other, another key to retention.

Tips for retention in today’s tight market:

• Treat everyone respectfully.

• Set values at the top and ensure alignment.

• Ensure managers are developed to be skillful and to maintain those values.